A 1-year call option with a strike price of 80 costs 20 a, Ask an Expert

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A 1-year call option with a strike price of $80 costs $20. A share costs $70. The interest rate is 10% per year.

(a) What should a 1-year put option with a strike price of $80 trade for?

(b) How could you earn money if the put option with a strike price of $80 traded in the market for $25 per share instead? Be explicit in what you would have to short (sell) and what you would have to long (buy).

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91999297

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